Foster Wheeler sues the JEA, claiming breach of contract

CLINTON, N.J., Nov. 13, 2002 — Foster Wheeler Ltd. announced that its subsidiary, Foster Wheeler Energy Corp. (FWEC), has filed a breach of contract lawsuit against the JEA (formerly known as the Jacksonville Electric Authority) in the U.S. District Court, Middle District, Florida (Duval County).

The JEA is the eighth-largest municipal utility in the United States.

Under a contract with the JEA, FWEC provided the engineering, procurement and construction of two state-of-the-art circulating fluidized-bed (CFB) boilers and an accompanying boiler island for use at the JEA’s Northside generating station, as part of the JEA repowering project for Units 1 and 2.

These 300 MW solid-fuel-fired CFB boilers provided by FWEC allow the JEA to greatly reduce both plant emissions and operating costs while dramatically increasing power generation.

Use of Foster Wheeler’s leading-edge CFB technology at the Northside station qualified Foster Wheeler to obtain, for the benefit of the JEA, $74 million in funding support for the project from the U.S. Department of Energy’s Clean Coal Technology Demonstration Program. Power magazine gave the project its “2002 Powerplant Award” in its September 2002 issue.

The complaint alleges that after FWEC successfully completed the design, procurement and initial-construction phases of the contract, the JEA interfered with its work. The JEA’s failure to provide services, equipment and plant access to FWEC within agreed-upon timeframes delayed final construction and performance testing.

Further, in order to supply sufficient and lower-cost electricity to its customers during the peak summer months of 2002, the JEA commandeered the plant, which was fully operational but for commissioning, and began commercial operation.

Thus, while the JEA derives benefits from plant operation, and millions of dollars in revenues from its output, Foster Wheeler has been denied the opportunity to complete its work and fairly demonstrate its CFB technology. The complaint also states that the JEA has refused to pay outstanding invoices of at least $30 million.

“The only option available to us to protect our shareholders’ interests was to file this lawsuit,” said Thomas R. O’Brien, general counsel and senior vice president. “This follows months of effort to amicably resolve our differences with the JEA. Notwithstanding the JEA’s intransigence, we continuously offered to complete the contract once it was adjusted to appropriately cure the JEA’s breach.”

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